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3 The following information is available for B Limited at 31 August 2018.

B Limited
Statement of Changes in Equity for the year ended 31 August 2018

Ordinary General Retained Total

Shares Reserve Earnings

$ $ $ $
Balance at 1 September 2017 150 000 65 000 85 000 300 000
Profit for the year 75 000 75 000
Transfer to general reserve 25 000 (25 000) –
Dividend paid (ordinary shares) (21 000) (21 000)
Balance at 31 August 2018 150 000 90 000 114 000 354 000

Other balances at 31 August 2018

$
Trade payables 73 000
6% Debentures (repayable 2024) 50 000
Debenture interest owing 4 800
General expenses owing 5 300
5% Bank loan (repayable 31 May 2019) 40 000

Additional information

B Limited had issued 300 000 ordinary shares.

REQUIRED

(a) Explain why the debentures are not included in the statement of changes in equity.

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(b) Calculate the dividend paid on ordinary shares for the year (in $ per ordinary share).

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© UCLES 2018 7110/21/O/N/18

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(c) Prepare an extract from the statement of financial position showing the equity and liabilities at
31 August 2018.

B Limited
Extract from the Statement of Financial Position at 31 August 2018

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(d) Suggest two possible reasons why the directors of B Limited transferred $25 000 to the
general reserve.

1 .................................................................................................................................................

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2 .................................................................................................................................................

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© UCLES 2018 7110/21/O/N/18 [Turn over

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(e) Explain two differences between ordinary shares and preference shares.

1 .................................................................................................................................................

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2 .................................................................................................................................................

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(f) Distinguish between cumulative preference shares and non-cumulative preference shares.

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(g) Complete the following table by placing a tick (✓) in the correct column to indicate where
each item would appear in the financial statements.
The first one has been completed as an example.

Income Statement of Statement

statement changes in of financial
equity position

Ordinary share dividend paid ✓

Director’s salary

Other receivables
[2]

[Total: 20]

© UCLES 2018 7110/21/O/N/18